Clarity Act Failure Leaves Capital Markets Vulnerable
BitGo CEO Mike Belshe said the U.S. Senate’s failure to advance the Clarity Act has left American capital markets exposed. A single firm can now combine exchange, brokerage, and custody functions for digital assets. This structure creates serious systemic risks.
The Senate rejected a motion to proceed on the Clarity Act on September 15. It failed to secure the 60 votes needed. BitGo had supported the bill and wanted it passed.
One-Stop Shops Create Single Points of Failure
Firms are building one-stop shops that cover trading, brokerage, and custody. They lack the market structure needed to reduce risks. Belshe pointed to Coinbase, which recently received a derivatives clearing organization license. The firm already holds a futures commission merchant license and runs an exchange.
Belshe identified two core risks. The first is custody risk. The second is counterparty credit risk. Exchanges have never held custody of assets before. Digital assets are bearer assets. Losing a private key means permanent loss of funds.
Risks Could Surpass the 2008 Lehman Collapse
A custody failure at a major one-stop shop would not stay contained. The entire market could go down. Belshe compared the setup to the 2008 failure of Lehman Brothers, only worse.
Lehman failed because it could not see its own exposure. The financial system survived that collapse. “Imagine if that had been the New York Stock Exchange offering those services and the whole New York Stock Exchange went down,” Belshe said. “As devastating as the 2008 crisis was, we survived it. But if it had been New York’s stock exchange going down, I don’t know if we would have.”
Without clear market structure rules, these risks remain unaddressed. Belshe said political differences stopped lawmakers from protecting American capital markets.
BitGo Continues Operations While Banks Move Slowly
BitGo has managed crypto for 13 years and can operate without the Clarity Act. Traditional banks and other firms remain cautious. They fear a return of Operation Chokepoint 2.0 and will move more slowly as a result.
Belshe also commented on AI agents and stablecoins. He believes humans will control AI for longer than many predict. Agents will still interface with human systems using dollars or existing currencies.
